Budgeting for stagnation

By Ann Pettifor

March 22, 2012

George Osborne's latest budget has reconfirmed Britain's prolonged collapse in economic activity, as he thrashes around for supply-side "solutions".

He announced a long list of measures: taxpayer guarantees to banks reluctant to lend; tax cuts for the very rich; loans for youthful entrepreneurs; a kite-flying pilot on Sunday trading hours; deregulation of public sector pay and planning; incentives for private investment.

The chancellor expects these supply-side measures to stimulate recovery – on their own. Given that Britain has the highest levels of private debt in the world, given the broken banking system, high unemployment and sustained economic weakness, he appears to anticipate little real opposition to these measures.

The British public have quietly accepted that incomes are falling in real terms, and there is little resistance to rising unemployment.

Yet all the supply-side solutions in the world will do little to aid recovery in the absence of growing demand for goods and services. Nothing will happen if customers (of banks, firms, shops) simply cannot or will not walk through the door.

The chancellor has resolutely refused to address falling levels of demand. The 2012 budget's sound and fury signifies, macro-economically, nothing but sustained stagnation.

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